Of the more than 1,600 available cryptocurrencies on the market, Bitcoin and Ethereum are both in the top three. And Ethereum may overtake Bitcoin in 2018, according to Forbes, which cites the platform’s aggressive growth. But how exactly does Ethereum stack up against Bitcoin in terms of features, uses, and more? Simplilearn’s Bitcoin vs. Ethereum tutorial video covers the similarities and differences between these two cryptocurrencies, and here we’ll recap what’s included in the video.
In 1999, Nobel Prize winner in economics Milton Friedman believed the Internet was going to be one of the major forces in reducing the role of government. He also thought that the one thing missing was reliable electronic cash, and just as he predicted, in 2009 the cryptocurrency Bitcoin was born.
What is Bitcoin?
In January 2009, Satoshi Nakamoto, an enigmatic figure, put into action an idea he had set out in a white paper – a peer-to-peer electronic cash system that could run safely without the need for a central authority. The concept of cryptocurrency, or money without a physical shape, was born with Bitcoin. There are no tangible bitcoins; instead, there are balances linked to a cryptographically encrypted public ledger. Some people purchase Bitcoin in order to store their funds in a location other than a bank. Some people purchase Bitcoin as a hedge, hoping that its price will be significantly higher in a few months or years than it is now. The most important aspect of Bitcoin is that it helps keep people’s identities private while sending and receiving money. The primary goal of Bitcoin was to develop itself as a viable alternative to government-backed fiat currencies. Its primary function is to serve as a store of value and a medium of trade.
What is Ethereum?
Blockchain technology is being used to develop applications that go beyond only facilitating the use of a digital currency. Ethereum is the largest and most well-known open-ended decentralized software framework, which was launched in July 2015. Vitalik Buterin, a Russian-Canadian teenager, invented Ethereum and published a white paper on the subject in late 2013. Buterin was initially enamored with Bitcoin and the horde of followers it attracted, but he quickly became dissatisfied with its limitations. Ethereum is another cryptocurrency that many people believe has the ability to overtake Bitcoin as the market leader. Ethereum is a global computing network that runs on the Ether cryptocurrency (ETH). Ether is a cryptocurrency that functions similarly to Bitcoin and can be used to make peer-to-peer transfers. It can also be used to make smart contracts. Smart contracts work in such a way that when a set of predefined rules is met, a specific output occurs.
Ethereum vs Bitcoin: Critical Differences Between The Two
With $825B market cap, Bitcoin is the biggest crypto on the block. Ethereum is in second place. But with a market cap of $204 billion, it won’t be stealing the top spot any time soon.
Early-stage investors in Bitcoin and Ethereum made huge profits and both coins are still popular choices for first-time speculators. But now that the initial gold rush is over, knowing what your investing in is more important than ever.
So is Ethereum a better investment than Bitcoin? Is it too late to invest in Bitcoin? Should you invest in Bitcoin and Ethereum at the same time?
And, perhaps most importantly, what is the difference between Bitcoin and Ethereum?
Similarities Between Bitcoin and Ethereum
Both Bitcoin and Ethereum are powered by their respective blockchains using proof of work consensus to validate transactions. Once 51% of the network’s nodes agree that a transaction is valid, it’s permanently uploaded to the blockchain. Ether and Bitcoin are the cryptocurrencies that enable these decentralized networks, and both of these assets have a limited supply. However, Bitcoin’s supply is finite, and no more than 21 million will ever be issued. Ether, on the other hand, has an inflation rate of 4% and a token burn mechanism in place to offset its issuance rate. Once Ethereum 2.0 launches, it’s likely that the supply of Ether will become deflationary, that is, it will decrease over time.
Another similarity between Bitcoin and Ethereum is network adoption. These networks have much more users than other cryptocurrencies, making them the 2 most valuable cryptocurrencies by market capitalization. While Bitcoin has more institutional adoption, Ethereum has a larger active user base and transacts far more volume than Bitcoin on a daily basis. Both cryptocurrencies have widespread adoption, so these networks should have strong staying power as the blockchain industry matures.
Pros and Cons of Ethereum
- Ethereum leverages blockchain technology for its decentralized, transparent system.
- The technology enables functionality beyond digital currency, such as decentralized applications.
- The developer community is one of the largest.
- It’s not Bitcoin, which is the most popular cryptocurrency in the world.
- Potentially higher transaction fees.
Pros and Cons of Bitcoin
- Bitcoin was the first cryptocurrency on the market.
- The coin has the best brand recognition and most liquidity, which has made it the most widely accepted crypto.
- There’s still huge potential growth for Bitcoin.
- Bitcoin also uses blockchain technology designed to protect against fraud or identity theft.
- Its value is based on supply and demand, not political interference.
- Bitcoin has a fast transaction speed.
- Bitcoin’s price is highly volatile, recently hitting a 10-month high in terms of volatility.
- High energy usage may be bad for climate change.
- Bitcoin doesn’t provide 100% anonymity.
Bitcoin vs Ethereum: What the experts say
There is no shortage of Bitcoin supporters in the world of business and finance. Of course, this year, the biggest news has been Elon Musk’s firm Tesla acquiring $1.5 billion worth of BTC as part of its long-term investment strategy. However, Morgan Creek Digital’s Anthon Pompliano is also confident in Bitcoin, predicting that it will reach $100,000 by the end of 2021 and even going as far as to say that BTC could eventually hit $1 million per token – though he stopped short of giving a timeframe on this. Similarly, Galaxy Digital investment guru Mike Novogratz is also bullish on BTC, also predicting it to hit the $100k mark before the year is out.
So what about Ethereum? Suffice to say the altcoin doesn’t quite have the high-profile backing that Bitcoin has, but there are still plenty of voices of support out there. Managing partner at Blocktown Capital, James Todaro, is overwhelmingly bullish on ETH, believing it will reach a staggering $9,000 before the end of 2021.
Mr Todaro’s prediction was echoed by Simon Dedic, the Co-founder of Blockyre, who also believes Ethereum has the potential to reach $9000. However, he did not speculate when this price point might be reached.
Bitcoin or Ethereum: Which one is Better?
The answer to the question on which one is better in the argument between Bitcoin vs. Ethereum, it depends entirely on your requirements. While, Bitcoin works better as a peer-to-peer transaction system, and Ethereum works well when you need to create and build distributed applications and smart contracts. The choice is entirely up to you to choose a winner between Bitcoin vs. Ethereum.
From the information provided above, we can say that researching Bitcoin vs Ethereum, has led to a deeper thought of which blockchain technology can improve every aspect of our lives. However, it’s crucial to understand that fundamentally Bitcoin and Ethereum are both very different ideas: Bitcoin is considered as a store of value whereas Ethereum is considered as a decentralized platform to program other decentralized ideas. Moreover, the currency that runs Ethereum is called Ether. Along with these vital facts, it is also vital to understand the idea of the blockchain which makes Bitcoin and Ethereum possible. We now aren’t required to give anyone our precious data to conduct transactions because blockchain gives us the ability to create a trustless, immutable way to do business.
If you’re pondering which to choose in 2022, Bitcoin or Ethereum, the answer is a little tricky because both coins do seem to have huge potential and have lots of reasons to grow further. For example, Bitcoin is well-known for enjoying massive price hikes after halving event, the process which cuts its block rewards for miners in half. Moreover, the third halving occurred on May 11, 2020, and, so far, the surge hasn’t disappointed. Although, it did come much earlier than expected, where everyone began to believe that it might not be caused by the halving but by institutional interest. The incident might have happened due to both having an equal hand in the price growth.